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Monetary Policy CommitteeRecent Economic Developments
M. Heerah-Pampusa
Head - Economic Analysis Division
14 July 2014
© Bank of Mauritius 2
Main Points
• Confirmation of stronger global growth in 2014• Decoupling among advanced economies• Slow pace of growth in emerging markets possibly
bottoming out• Global inflation picture benign – recent increase in oil prices
could be a risk
• Domestic output to benefit from international developments
• Some downside risks • External demand• Domestic demand
© Bank of Mauritius
External Environment
3
© Bank of Mauritius 4
Expansionary near-term outlook
Source: JP Morgan.
© Bank of Mauritius 5
Mixed Performance in Eurozone
Source: OECD.
© Bank of Mauritius 6
Moderate global inflation …..
June 2014 Reuters poll: mean inflation rates in the US, UK and euro area are expected to be around 2.1 per cent, 1.9 per cent and 0.9 per cent, respectively, by end-2014.
© Bank of Mauritius 7
…… but some upside risks from higher oil Prices
Sources: FAO and Reuters.
FAO Food Price Index Oil Prices
EIA Forecast for Brent crude oil prices: $108 a barrel in 2014.
160
170
180
190
200
210
220
230
240
250
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010
2012
2011
2013
2014
Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14
90
95
100
105
110
115
120
90
95
100
105
110
115
120
ICE NYMEX
US$ per barrel
© Bank of Mauritius 8
Developments in the domestic economy since the last
MPC meeting
© Bank of Mauritius 9
Slower growth in 2014Q1
0
1
2
3
4
5
6
72
01
0Q
1
201
0Q
2
201
0Q
3
201
0Q
4
201
1Q
1
201
1Q
2
201
1Q
3
201
1Q
4
201
2Q
1
201
2Q
2
201
2Q
3
201
2Q
4
201
3Q
1
201
3Q
2
201
3Q
3
201
3Q
4
201
4Q
1
201
4Q
2
Y-o-Y (sa) Q-o-Q (annualised, sa)
Per cent
© Bank of Mauritius 10
Output gap assessed to be negative …
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.52
00
8Q
12
00
8Q
22
00
8Q
32
00
8Q
42
00
9Q
12
00
9Q
22
00
9Q
32
00
9Q
42
01
0Q
12
01
0Q
22
01
0Q
32
01
0Q
42
01
1Q
12
01
1Q
22
01
1Q
32
01
1Q
42
01
2Q
12
01
2Q
22
01
2Q
32
01
2Q
42
01
3Q
12
01
3Q
22
01
3Q
32
01
3Q
42
01
4Q
12
01
4Q
2
HP
Band-Pass
Kalman
Per cent
© Bank of Mauritius 11
… while monetary conditions continue to be accommodative
© Bank of Mauritius 12
Exports: moderate growth
© Bank of Mauritius 13
External Trade Exports
Imports
Per cent
Per cent
2012Q1 2013Q1 2014Q1
Europe 0.1 8.9 -5.0
of which
UK 3.4 9.3 -16.4
France -9.4 -5.0 19.1
Italy 17.4 30.6 2.1
South Africa 32.4 3.3 -20.2
USA 4.1 1.7 21.1
Asia 21.4 36.2 75.0
2012Q1 2013Q1 2014Q1
India -3.2 14.3 -13.6
China 15.7 -2.6 4.7
France 5.3 -7.0 -3.0
South Africa -19.4 13.2 -6.8
Total imports 7.4 2.0 -5.6
2012Q1 2013Q1 2014Q1
Total Exports 6.0 13.1 5.0
excluding ships, stores & bunkers 16.7 42.7 7.7
Domestic Exports 6.2 8.7 -1.3
Re-exports -4.4 3.8 33.6
© Bank of Mauritius 14
Investment: slow recovery from 2012/2013 lows
• Continued contraction in Building and Construction work in 2014Q1 (-3.2%), but machinery & equipment up by 11%.
• GDFCF to grow by 0.4% in 2014 , but to contract by 0.8% excluding aircraft and marine vessel. This is compared to contraction of 3.3% [6.7% excl. aircraft & marine vessel] in 2013.
© Bank of Mauritius 15
Growth in GDFCF driven by jump in public investment
2014* - Forecast.
© Bank of Mauritius 16
Declining savings and investment rates
2014* - Forecast.
© Bank of Mauritius 17
MCCI Business Confidence Index (June 2014)
• Indicator fell to 79.6 points in 2014Q2.
• Underlying factors: subdued domestic demand, fierce competition in the local market, cost of capital, lack of skilled labour, unfavourable exchange rate.
© Bank of Mauritius 18
Pluriconseil Barometer
February-14 April-14 June-14Optimism about economic outlook (one year ahead)
50% of respondents 60% of respondents 60% of respondents
Growth 3.3% to 3.6% (90% of respondents)
n.a 3.3% to 3.6% (67% of respondents)
Unemployment rate 8.3% or more(67% of respondents)
n.a 8.0% to 8.1% (70% of respondents)
Inflation rate Up to 4.0% in June 2014 (53% of respondents)
Up to 4.2% in June 2014 (67% of respondents)
4.2% (40% of respondents)
KRR n.a Unchanged (90% of respondents)
n.a
© Bank of Mauritius 19
Consumption: slight pick-up expected in 2014
• Final consumption growth of 2.6% in 2014 compared to 2.3% in 2013• Private consumption growth projected at 2.8% in 2014, from 2.6% in 2013• Govt consumption growth to increase to 2.0%, from 0.7%
© Bank of Mauritius 20
Labour market
2013Q1 2013Q4 2014Q1Unemployment rate (%) 8.6 7.5 8.0Unemployment rate SA (%) 8.0 8.3 7.4
© Bank of Mauritius 21
Decline in productivity
© Bank of Mauritius 22
Sectoral Contribution to Growth
© Bank of Mauritius 23
Y-o-y growth rates in some key sectors
-20
-16
-12
-8
-4
0
4
8
201
1 Q
1
201
1 Q
2
201
1 Q
3
201
1 Q
4
201
2 Q
1
201
2 Q
2
201
2 Q
3
201
2 Q
4
201
3 Q
1
201
3 Q
2
201
3 Q
3
201
3 Q
4
201
4Q
1
Accommodation & Food Service
Manufacturing
Construction
Per cent
• For 2014, SM expects growth of 5.3% in ‘financial and insurance activities; 3.5% in ‘accommodation and food service activities’; and 1.7% in manufacturing;
• Construction may contract by 4.8%
© Bank of Mauritius 24
Improvement in tourist arrivals
• Tourist arrivals increased by 5.3% y-o-y in May 2014.• Y-o-y growth of 3.3% during period Jan-May 2014• Forecast of 1,030,000 arrivals in 2014.
© Bank of Mauritius 25
Fall in tourist earnings expected to be reversed
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Rs billion
2010
2011
2012
2013
2014
• Fall of 2.1 per cent y-o-y for the first five months of 2014 to Rs19.2 bn• Projected increase of 9.7% to Rs44.5 bn for 2014
© Bank of Mauritius 26
Recap
• Slower growth in 2014Q1
• But, improving international environment should have positive impact on external demand going into 2014H2
• This should translate in a gradual improvement in domestic demand
© Bank of Mauritius 27
Thank you